How America is rigged for the rich

By Eric Liu

Updated 4:57 PM ET, Wed April 9, 2014

Income inequality in America 24 photos

Income inequality in America – In the early 20th century, industrial tycoons like the Rockefellers and Carnegies amassed fortunes in railroads, steel or oil. Here, a view of Cornelius Vanderbilt's residence in New York in 1908.

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Income inequality in America 24 photos

Income inequality in America – Wealthy passengers aboard a ship near San Francisco, circa 1910s. In this era, the top earners accounted for roughly 18% of the national income.

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Income inequality in America 24 photos

Income inequality in America – People gathered across from the New York Stock Exchange on "Black Thursday," October 24, 1929. The stock market crash of 1929, fueled by excessive speculation on Wall Street, set off the Great Depression.

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Income inequality in America 24 photos

Income inequality in America – Thousands of unemployed people waited in line to register for federal relief jobs in New York in 1933. The unemployment rate rose to 25% that year.

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Income inequality in America 24 photos

Income inequality in America – On September 12, 1935, Franklin D. Roosevelt and his staff met to find a solution to the economic crisis. FDR's New Deal policies tightened regulation of Wall Street, strengthened unions and set the top marginal tax rate for the rich at 90%.

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Income inequality in America 24 photos

Income inequality in America – A nurse takes care of children of migratory farm workers in Arvin, California, in 1937. The unemployment rate hovered in the teens. FDR created large-scale public work programs to provide jobs for the poor and middle class.

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Income inequality in America 24 photos

Income inequality in America – A plant in Toledo, Ohio, that made bombs. With the advent of World War II, demand for production of goods and services increased. By the mid-1940s, the unemployment rate dropped to less than 5%.

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Income inequality in America 24 photos

Income inequality in America – Labor unions benefited from FDR's policies and grew in power midcentury. Transit workers protested in New York on April 17, 1950. The Transport Workers Union threatened a strike if even one worker was punished for demonstrating.

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Income inequality in America 24 photos

Income inequality in America – Truck supervisor Bernard Levey with his family in front of their new home in 1950. The post-war period was a prosperous time for middle-class Americans.

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Income inequality in America 24 photos

Income inequality in America – From the 1950s to the 1970s, income inequality fell. Some economists call this period "The Great Compression." The median income at the time allowed a single earner to purchase a modest house and a car, support a wife and three children.

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Income inequality in America 24 photos

Income inequality in America – A worker at the Department of Motor Vehicles in Sacramento, California, in 1966. The feminist movement fought for equal pay for women, who were earning about 60 cents for every dollar earned by men.

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Income inequality in America 24 photos

Income inequality in America – In the 1970s, income inequality began to rise. The economy experienced wage and inflation problems, along with an oil crisis that caused a gasoline shortage. Here, a gas station in New York.

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Income inequality in America 24 photos

Income inequality in America – Post-1979 has been called the "Great Divergence." Some say that President Ronald Reagan's policy of supply-side economics, which reduced taxes for the rich, was a contributing factor.

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Income inequality in America 24 photos

Income inequality in America – Real estate tycoon Donald Trump with his Rolls Royce at his Mar-a-Largo property in Palm Beach, Florida.

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Income inequality in America 24 photos

Income inequality in America – The 138-meter (453-foot) yacht "Rising Sun" was purchased by Larry Ellison of Oracle, who has been one of the nation's highest-paid executives. From the 1990s on, CEO compensation greatly outpaced the average compensation of workers.

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Income inequality in America 24 photos

Income inequality in America – Home construction in Inverness, Illinois, in 2006. Risky mortgage lending was packaged by banks that sought to make big profits. The collapse of housing bubble instigated a credit crisis that triggered the global financial meltdown of 2007.

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Income inequality in America 24 photos

Income inequality in America – By 2007, the top 1% accounted for 24% of national income. Bernard Madoff, whose Ponzi scheme is one of largest financial frauds in history, made billions off hapless investors. Here, shoes that once belonged to Madoff.

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Income inequality in America 24 photos

Income inequality in America – Lehman Brothers, which collapsed in September 2008, filed for the largest bankruptcy in U.S. history. Major financial institutions were bailed out by the government with a massive amount of taxpayer money.

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Income inequality in America 24 photos

Income inequality in America – John Thain, former CEO of Merrill Lynch, doled out more than $4 billion in bonuses to employees. Despite the worst economic crisis since the Great Depression, Wall Street handed out $18.4 billion in bonuses for 2008, which is the "sixth-largest haul on record."

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Income inequality in America 24 photos

Income inequality in America – A job fair in March 2009. Unemployment rose to 10% during the Great Recession.

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Income inequality in America 24 photos

Income inequality in America – In September 2011, the Occupy Wall Street movement sprang up. The average income, adjusted for inflation, grew $59 from 1966 to 2011 for the bottom 90% of Americans.

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Income inequality in America 24 photos

Income inequality in America – Occupy Oakland protesters in California. In 2012, the income of the top 1% increased nearly 20% compared with a 1% increase for 99% of Americans.

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Income inequality in America – A suite at the Four Seasons Hotel in New York City costs $45,000 a night. Middle class Americans had a median household income of a little over $51,000 in 2013.

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Income inequality in America – Today, the top 1% controls about 40% of national wealth. At a hearing in Washington D.C. about Wall Street and the financial crisis, protesters hold a placard depicting Goldman Sachs CEO Lloyd Blankfein, who once famously said, "I'm doing God's work."

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Story highlights

Congressman Paul Ryan says America has a problem in culture of poverty

Eric Liu: Actually, we live in a dysfunctional culture of concentrated wealth

He says certain antisocial values and behaviors have taken root among the rich

Liu: The wealthy rigged the political and economic games to amplify their gains

When Congressman Paul Ryan opined recently that there was a "real culture problem" in poor communities, "in our inner cities in particular," and that this culture was behind some of the country's economic troubles, he didn't realize how half right he was.

People are continuing to debate fiercely what Ryan said and whether he meant to propagate racially coded explanations of poverty's roots. But put that aside for a moment. Here's what he was right about: There is indeed a culture in America that is pathological and now threatens our social fabric. It's not the culture of poverty, though. It's the culture of wealth.

We live in an age of extreme concentration of wealth in America. The problem is not just that the 1% have managed to nearly triple their share of national income in the last three decades. Nor is it just that the 1% increasingly are fed, schooled and housed in a bubble apart from the rest of their fellow citizens.

The problem is that today's concentration of wealth is breaking the golden link that Ryan and others take pains to emphasize -- the link between work and reward.

Eric Liu

Economist Thomas Piketty's landmark new book "Capital" unpacks this delinking in great statistical detail. It turns out that increasing numbers of Americans in the 1%, .1% and .01% have done little to "earn" their wealth or privilege.

Contrary to myth, most of today's plutocrats are not the kind of Steve Jobsian visionary risk-taking entrepreneurs or superstar celebrities. The .01%, for instance, tend overwhelmingly to be high-end corporate managers and executives, particularly on Wall Street, operating in interlocking networks that inflate the standard of what an executive is "worth." Or they are the heirs of the great entrepreneurs (4 of the 10 richest Americans are children of Sam Walton), inheritors of fortunes of which it can truly be said, "someone else built that."

An aristocracy is emerging in America, a class of insiders that corrodes the promise of equal citizenship. And with this compounding of unearned advantage, certain antisocial values and behaviors have taken root among the superrich -- norms that threaten to corrupt the rest of American society.

What's in this dysfunctional culture of concentrated wealth? Look around Wall Street. You'll find tribal insularity, short-term thinking, personal irresponsibility, cynicism about playing by the rules, an aversion to socially productive labor, a habit of shameless materialism, an inability to defer gratification and a lack of concern for what "message" all this sends to the youth raised in such an environment.

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In short, you'll find the very things typically imputed to the culture of poverty.

Now, to be sure, there are poor people who do exhibit these antisocial values and norms. And there is no question that plenty of poor people are poor because they made bad choices and behaved in self-destructive ways.

But rich people who exhibit such values have something the poor don't: Money. Money buys exemption from bad choices. Money confers power -- in particular, over the poor. It confers the power to frame public narrative and policymaking and to determine whose behavior -- whose culture -- is (and isn't) called pathological.

Today, as it was during the last Gilded Age, the concentration of wealth gives the rich the political clout to further concentrate their wealth. (And now, as then, the Supreme Court greases the skids in the name of "liberty"). This clout is wielded in plain sight now, without any pretense of civic equality. And it calls to mind the warning attributed to Justice Louis Brandeis: "We may have democracy, or we may have wealth concentrated in the hands of a few, but we can't have both."

When the richest 400 families in America have more wealth than the bottom 155 million Americans combined, the danger to the republic is far more clear and present than that posed by the "welfare queens" of lore or by anecdotes of shiftless inner-city men.

That would be true even if the super-rich today had entirely benign or merely neutral policy preferences. But in fact they've rigged the game of policy, subsidies and tax preferences to amplify and hoard their gains.

This isn't to suggest that all super-wealthy people are "welfare kings" (they're not) or to imply that they have a monopoly on selfishness or sociopathic attitudes (they don't). Yet if it's unfair to paint everyone in the 1% with the same unflattering brush of "dysfunctional culture," isn't it far worse to do the same to the poorest 20%?

Wealth and advantage are as strongly self-reinforcing as poverty and disadvantage. It's possible to recognize this fact while also championing grit, gumption and good values. In fact, it's essential. But culture doesn't explain everything. And where it matters isn't only among the poor or nonwhite.

If we're going to reform the norms in this country so that opportunity is truly reflective of effort and talent, we have to do more than pick on those with the least. We have to start at the top.